Poland: BTR market will grow by 6.5 thousand apartments by the end of 2024

by   CIJ News iDesk III
2024-05-14   06:18

Institutional rental housing market (Build-to-Rent - BTR, previously known as PRS - Private Rented Sector) will increase by 6,500 apartments by 6,500 apartments compared to approx. The 16,000 available at the end of 2023, according to a report by Knight Frank and Dentons. More than 5,100 new dwellings were put into operation last year, which is a 40% increase in y/y.

For the first time, companies use the wording BTR, which they believe to be more precise in terms of the institutional rental housing market and separates this segment from the entire rental market. The commonly used abbreviation PRS (Private Rented Sector) in its definition also applies to private rental of housing.

At the end of 2023, more than 16,000 BTR flats were available for hire from institutional investors, of which nearly 32% were commissioned in the same year. BTR apartments accounted for only 1.4% of the total resources of apartments for rent in the main cities of Poland, while the resources of privately owned apartments are estimated at over 1.2 million units, which gives a market share of 98.7%. By the end of 2024 [on the BTR market], about 6,500 apartments will be put into use. The land on which about 36,200 apartments may be built have already been secured by investors, according to the report.

Warsaw stands out as the largest BTR segment in Poland, which accounts for about 41% of the total BTR resources in the country. There are currently over 6,600 BTR apartments in the capital, and another 4,400 units are under construction. Regional cities also keep up with the capital in terms of development. Compared to 2022, the total resources of BTR premises in regional cities increased by more than 50%. Total stock is over 9,600 apartments.

In the stable projects that have been operating on the market for at least 12 months, the average vacancy rate in Poland at the end of 2023 was estimated at 1.6%, according to the report.

The market sentiment barometer conducted among investors active on the BTR market confirmed that over 40% of entities estimate the prime yield in Warsaw at the level of 5.56%, and less than 20% at over 6%. All respondents (100%) also confirmed that their development strategy envisages the implementation of new projects. Both indicators confirm confidence in this market segment. At the same time, when asked about barriers and risks in market development, they point to financing costs (69%), limited land availability (44%) and their overestimated value by sellers (44%). From the legal perspective, the lack of REITs (69%) and transparent tax regulations (62%) were mentioned most often, it was reported.

"The market of apartments for rent - BTR - in Poland is developing dynamically, constituting an attractive prospect for investors. By the end of the year, the number of available apartments for rent on the institutional rental market exceeded 16,000, and almost 12,000 apartments are still under construction. The increase in demand is visible especially in large cities - in Warsaw, Krakow and Wrocław, and it is also in these locations that investors plan new projects in our survey. It is worth emphasizing that investors are becoming more and more familiar with this sector and are considering a variety of options for the purchase of land and projects. Commercial land that enables collective development not attracted much interest among institutional entities a year ago, but are now becoming more attractive to them. The change in approach is directly due to the advantage they have on land for the purpose of housing development. These are primarily a better location, greater availability and, above all, an attractive price," said investment broker in the Capital Markets department at Knight Frank Sylwia Jankowska.

According to the management of counsel in the Tax Law Team at Dentons Tomasz Krasowski, due to the growing market practice, the taxation of BTR projects is becoming increasingly predictable.

"Recently, we have also seen favorable changes, including the possibility of taxing residential buildings rented in the long-term natural persons with a preferential real estate tax rate (PLN 1.15) instead of PLN 33.1). Undoubtedly, a huge development impulse for the BTR market would be the introduction of long-awaited regulations regarding the so-called so-called so-called investors. REITs, which seems possible in the future, among others, in the light of the assumptions for these regulations recently announced by the Ministry of Development and Technology," said Krasowski.

Source: Knight Frank, Dentons and ISBnews

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